Madoff was operating a "Ponzi scheme" in which there was no real growth, but payouts were made from the money that came in because the fund appeared to be doing so well. Why is this morally and legally wrong? Because it's unsustainable, and the operator knows it.
But how different is a housing bubble, if it's patently obvious to the government, central bank and other key players that it is indeed a bubble? Like a Ponzi scheme, a housing bubble gives illusory returns, not based on any real increase of value but rather through the attraction seemingly high returns have for new entrants to the game. This is surely morally equivalent to a Ponzi scheme?
If so, aren't Gordon Brown and Alan Greenspan guilty of perpetrating (for political rather than pecuniary gains) Ponzi schemes at the level of the entire economy, whose effects are vastly worse than even Madoff's historic scam?
(Agreed, these key players may not have been 100% certain it was a bubble, but it was pretty clear some time ago. But look at it this way: suppose Madoff was, well, mad, and genuinely believed his investors would get those sorts of returns if they stayed with him long enough. Would that make his fraud better? It might affect personal responsibility, but the policy imperative would remain the same. So at some level, what matters if whether it was possible to know it was a bubble: I would claim it was. Of course, when you add to this the story of how a relatively small write-down in the value of some real estate led to this mayhem, you only get more evidence against Greenspan, Brown and the legions of bankers they served.)